Predictions for the housing market in both countries from RICS
A positive outlook is envisaged for the housing market in Greece and Cyprus, as perceived, respectively, by the recent Weekly Real Estate Comment from RICS (Royal Institution of Chartered Surveyors) and by Member of the Board of Directors of RICS, Pavlos Loizou MRICS.
With reference to Cyprus, Mr. Loizou MRICS commented: «The case of Greece is in many ways similar and parallel to the situation in Cyprus. Anecdotal evidence suggests that over the past year, house prices in Nicosia have decreased by 5-15% and in coastal cities by 25-30% in tourist areas and by 10-20% in areas where locals reside. The variance in house price behaviour can be explained by the small, by comparison, overdevelopment in Nicosia and by the lack of overseas investors/buyers in the capital who tended to bid-up prices. Even in coastal cities, the reduction in prices is fairly confined in the areas where overseas buyers/investors were active and is limited to middle to low quality housing».
According to the Q2 2009 Real Estate Comment by the Bank of Greece, appreciation in home price peaked at 13.9% in the first quarter of 2006 and then moderated gradually until the first quarter of 2009, at which point it turned negative at 1.9%.
The Real Estate Comment attributes the resilience of the Greek housing market to the relatively mild economic downturn that in turn has prompted only a modest labour market adjustment. In addition, average mortgage lending rates have fallen sharply from 5.35% in October 2008 to 3.86% presently. Looking forward, the review concurs that house prices may well fall further. However, such price falls are likely to be limited in magnitude and duration given the improvements in the hard data mentioned previously.
Mr. Loizou MRICS attributed the resilience of Cypriot house prices to the relatively mild slowdown in GDP growth and the modest increase in the unemployment rate. The GDP decreased by 0.4% during third quarter of 2009 and by 0.7% in the second quarter of 2009, which compares favourably with some leading EU economies. With the market slowing down, the real estate market and the economy as a whole needs to progressively deleverage.
Looking forward, Mr. Loizou added: «House prices may well fall further in the short run, although this is unlikely to be significant in Nicosia and in areas where locals tend to live. The lack of new projects and the decrease in construction activity will result in a progressive reduction in supply, as demand outstrips it resulting in a cushioning of prices. In coastal areas, further reduction in prices can be expected, particularly in low cost housing and apartments in particular where overseas investors are hard pressed to repay their loans».
RICS (Royal Institution of Chartered Surveyors) is the mark of property professionalism worldwide. It covers all aspects of property, construction and associated environmental issues. In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining RICS status is the recognised mark of property professionalism. Over 100.000 RICS members, who are Chartered Surveyors, operate out of 146 countries, supported by an extensive network of national and regional offices located in every continent around the world. RICS’ global headquarters is based in London. The European World Regional office is based in Brussels, supported by 19 national associations in Europe. RICS has a Royal Charter which requires the organisation to maintain and promote the usefulness of the profession for the public advantage. This is what sets RICS apart from trade bodies.
